Axel Springer profits from new products around men’s magazines

Axel Springer’s men’s magazines are developing new products and services based on the core brand values. In an INMA Webinar on Wednesday, members learned about the Axel Springer process for this and why it’s time for publishers to diversify their brands.

Katharina Neubert, managing director of Sport Bild, Europe’s largest sports magazine and a publication under the Axel Springer brand, shared methods that helped her team put consumer needs first to make strategic decisions in for brand diversification. Neubert included three real cases, showing the power of building product around consumer needs.

Presenting from Hamburg, Germany, Neubert began with this assumption: In the future, publishers will earn more money selling products than selling print magazines.

In the future, publishers will earn more money selling products than selling print magazines.

“This [mentioned at INMA’s World Congress of News Media in May] led to very interesting coffee breaks because a lot of media managers show interest in this topic,” she said. “I think this is because we are all dealing with the same challenge: how to compensate for a decreasing core business.”

Why it’s necessary for publishers to diversify their media brands

Neubert shared data on the decline of print magazine media in Germany. “The magazines in all segments lost more than half of their circulation in the last 10 years. Numbers from other segments and countries show a similar trend, so we cannot stop this development.”

She followed that up by saying that, at least from her experience at the magazine in Germany, digital revenues are unable to keep up with or replace the loss in print revenue.

New revenue sources

“We need to find new revenue sources,” Neubert said. “There are several options. They can be structured as far as new and existing products and services, and new and existing markets.”

Product development such as news apps is important, but the revenue from such initiatives as paid content and digital advertising can’t compensate for the losses in print. “Product development is, of course, absolutely necessary — but it won’t rescue us.”

An example of new market development would be international licenses, but the potential is limited by cultural and language differences. That leaves publishers with the last option: diversification.

Neubert referenced a comment made by the Schibsted CEO, Kristin Lund, at World Congress: “It is the movie that draws the crowd, but the money is in the popcorn.” Circulation and advertising revenue are not able to finance editorial content alone.

“It’s estimated that more than a quarter of all German magazine publishers’ revenue is generated by business models apart from digital and print media this year. Although diversification needs time and effort, this shows that publishers do not bother about that and try it anyway.” That’s because diversification is a promising strategy to generate significant revenue, and it offers the readership as well as advertisers new experiences.

“What I took out of this is that we need to find our popcorn,” Neubert said. “We can start doing that by creating a magazine value proposition.”

Using brand values to create new business models

From the reader’s perspective, the values magazines hold include capability, help, trust, expertise, and independence. Although there has been a lot of talk about distrust of the media today, print journalism is still the most trusted media of consumers.

“This trust has been built up over a long period of time,” Neubert said, “so it can’t be replaced by social media platforms, and I think we should start taking advantage of this.”

From the advertiser’s perspective, magazines still have a wide range of values, including impact, reach, quality, credibility, and ad space.

“If we can instil these values to new products, we can meet our readers’ needs in many more ways, and we can find more ways of monetising our core assets.”

How Axel Springer finds new ways to diversify: the golden circle

She suggested that consumers do not buy products and brands for the exact thing that they are, but rather for their purpose. This is based on a TED Talk by Simon Sinek, author of the book Start With Why.

For example, Apple customers do not buy those products for the technology or for the best value. “Apple is able to monetise its purpose, which is to disrupt the status quo by great design and user-friendliness. People are likely to buy from Apple because they buy that specific sentiment.”

Many successful companies share a strong and common purpose. One way to find that purpose is to find your “golden circle.”

The golden circle consists of three layers:

What: This outer layer consists of all the products a company offers.

How: Think of adjectives that describe how your company operates.

Why: This inner circle is where most people don’t get. Why do you do what you do?

“So the main challenge for a management team, in my view, is to articulate this purpose or a belief — why you get out of bed in the morning,” Neubert shared. “The aim of this model is to think from the inside out, not the other way around. If people are convinced of your purpose, they are more likely to buy other things from you.”

To illustrate, she shared her team’s golden circle. “We define our purpose as ‘we entertain, inform, and help people at eye-level.’ We use it to focus on our purpose when it comes to product development and new business ideas.”

Every new product that her team develops has to match that purpose — it acts as a compass to help find out which new products fit to the company brand. “When you find out what your brand stands for, you are very well prepared to develop new products from that.”

Let the ideas meet real consumer needs

When it comes to idea generation, Neubert advised publishers to step into their readers’ shoes as much as possible. It helps to choose an idea generation method that really focuses on customer centricity.

Core to design thinking is the belief that ideas can come from anywhere and that anyone can innovate. The process can take anywhere from a few hours to weeks, and during that process small groups of people work on solving a design challenge.

When her team is going through a design thinking process, they move through a methodology consisting of five steps:

Empathise. Get out there and talk to real people who are dealing with the problem. This can include interviews, focus groups, and market research.

Define. Frame the problem by using “How might we ... ?” questions.

Ideate. This is the brainstorming part, with ideas and solutions presented. The team votes to come up with the most popular idea.

Prototype. This can be utilised to get rapid consumer feedback in a testing phase.

Test. The collective feedback from the testing then flows back into the prototyping until a minimum viable product is created.

The five phases of the design thinking process.

The main advantages of design thinking are that it focuses on consumer needs and real problems, provides rapid feedback and results, leverages collaboration, empowers people to think differently, and is fun.

Moving from theory to practice, Neubert shared three specific case studies of how Axel Springer used design thinking to build new products around consumer needs.

Auto Bild & Computer Bild

In this instance, the product monetises the brand trust through revenue from test and recommendation seals. Auto Bild and Computer Bild magazines regularly do consumer testing on thousands of products every year. The makers of those products can pay for the rights to use those seals on their products, building trust with the consumers and therefore selling more product.

Neubert shared an example from the brand Sonax, which makes a windshield cleaner tested by Auto Bild. Sonax bought the rights to use the Auto Bild recommendation seal. “They integrated the seal on their product to make it appear more trustworthy.”

Bike Bild City Edition

The second example was a physical product developed for Bike Bild magazine. The company offered a limited edition bicycle for sale to readers. The manufacturing company built and distributed bikes with the Bike Bild logo, and the two companies share the revenue. In return, the magazine promotes the bike through its channels, with advertising space, and gives the manufacturer a limited brand license.

Going back to her original statement that in the future publishers will earn more money selling products than selling print magazines, Neubert clarified that to say that today, the company already earns more with product than magazine sales.

“This year, we will certainly make more money from the bike sales’ commissions than we will from the magazine itself.”

Key learnings that her team took away from the Bike Bild venture were:

Monetise your brand equity.

Choose the right partner.

Cooperate for the long term.

Big is not always better.

Create win-win situations.

Glossy Box for Men

This was an exclusive deal for men offered before Christmas last year and sold out within weeks. The box, offered for €29.90, contained an assortment of new and popular products as well as the magazine, with a total value much higher than the box cost.

Axel Spring distributes the boxes itself and markets it under the company name. The partners provide 3,500 free products and appear in the promotion. “This year, the partners also paid us cash for the first time,” Neubert said. “That’s something I really want to point out because I never thought it would work one year ago.”

Learnings from this initiative included:

Take a risk. Make a product rather than buying it. Because Axel Spring was responsible for the supply chain, it carried more risk in this case —but with a larger revenue, as the company didn’t have to pay any third parties.

Meet consumer needs and create added value. With these boxes, Axel Springer is now just focusing on the Christmas edition because solving the added problem of gift-giving creates more value.

Don’t be afraid to fail. “Brand diversification always means doing something you have limited experience with, so it needs a little courage and confidence.”

Tear down silos to reach new audiences. “This is our first product that combines all three of our magazine brands. So, we aren’t thinking just about car enthusiasts, sports enthusiasts, or tech enthusiasts. This is only possible if you collaborate.”

Key takeaways from Axel Springer's method of new product development.

Key takeaways

Neubert concluded the presentation by summarising the key takeaways to share from the Axel Springer experience:

Diversification is necessary due to decreasing media revenue, and it is a promising source.

The only way to do it is to do it. There’s no one “proper way” to do product diversification. Use your golden circle to guide you.

INMA: By offering your brand seal on one product, does it antagonise a competitor who may also be your advertiser?

Neubert: It’s OK, that’s life. We are market leaders with all our magazines, and we are well known to the German audience.

INMA: How do you select the groups that work in the design thinking projects?

Neubert: What we did for a long time was promoted several employees to the groups, who we thought were the creative minds. But this year for the first time, we e-mailed all our employees and said we were taking a day to do this and who wants to join us? It surprised us how many people wanted to join us —including some of the more “silent” employees that we would not otherwise have heard from.

INMA: How do you make sure you focus on the customer needs as opposed to what you think they want?

Neubert: I think it’s two things. First, we go out and ask them. Maybe do an online survey. The second is that we try to launch the minimum viable product very early. We do not wait to perfection or take too long. We weren’t perfectly happy with our first men’s box, but were surprised to find it sold out within a couple of weeks. If we had waited until it was perfect, that wouldn’t have happened.

INMA: How do you choose the right partners?

Neubert: We try not to choose advertising partners first. We don’t want to shift revenue, we want additional revenue. Existing relationships are ideal because you know you can trust this partner and you’ve worked together before. We try to make the best-value offer because we aren’t in the premium segment.